Algorithmic stablecoins were once an extremely eye-catching attempt in the wave of DeFi that began in 2020.

所谓的“算法稳定币”指的是不用或者只用部分链上抵押物来发行稳定币的方法。

Unfortunately, those attempts almost all failed that year, pointing to the same outcome: an inability to stabilize the value strictly anchored to fiat currencies (mainly the US dollar).

I once wrote an article sharing my summary of the reasons for their failure:

At that time’s technology, without sufficient (in fact, needing excessive) collateral for guarantee, no matter how sophisticated the algorithm design seemed, it would ultimately de-anchor.

Despite those past lessons, attempts in this field have never ceased— in my view, if the on-chain world could have a decentralized on-chain central bank, that would be a very great and romantic miracle.

Now, Robinhood chain has a new attempt: Standard Reserve.

This project hopes to become an “on-chain central bank” and has now released a white paper (see reference link at the end).

So far, it has not sought venture capital but continuously refined its concept through community brainstorming.

Before sharing the project's mechanism, it is important to emphasize two significant differences between this project and the past “algorithmic stablecoins”:

First, it does not have the demand for a “stablecoin.”

Previous “algorithmic stablecoin” projects had a core demand to ensure that tokens were stably anchored to fiat currencies (such as the US dollar). However, this project does not have that demand; its demand is to ensure that the issued token (STANDARD) has a basic, stable price.

As for the price, it is determined by the market, but this price is guaranteed by a strongly consensual hard asset— in this project, the strongly consensual hard asset is currently tokenized gold.

Second, it has a hard cap on the issuance volume.

Previous “algorithmic stablecoin” projects issued “currency,” so there was no upper limit on the issuance volume. However, this project sets an issuance cap: 1 billion tokens (STANDARD).

With these two distinctions, the overall impression is that the difficulty of the project has decreased significantly, and its mechanism is much easier to understand.

The project uses the characteristics of Uniswap V4 to closely track the inflow or outflow of ETH in the ETH/STANDARD trading pair as an indicator to guide the issuance of tokens (STANDARD) and the handling of assets.

The project allows participants to become banks, referred to as “charters.” The project has reserved 1,000 genesis NFTs for contributors. Upon obtaining this NFT, one can directly become a charter. After the 1,000 NFTs, the system will auction the qualifications for charters daily.

Each charter can set up its own branch. To open each branch, it requires spending STANDARD. The spent STANDARD will be burned.

Each charter can open a maximum of 10 branches.

When the system detects that ETH in the ETH/STANDARD trading pair is a net inflow, the system will use the transaction fees obtained to purchase hard assets (tokenized gold) and accelerate the issuance of STANDARD. The issued STANDARD will be distributed to all branches.

When the system detects that ETH in the ETH/STANDARD trading pair is a net outflow, the system will slow down the issuance of STANDARD and will use the transaction fees obtained and fees accumulated from various operations to purchase and burn STANDARD.

Under this mechanism, when all STANDARD are fully issued, it will move towards deflation, as the transaction fees will continuously be used to repurchase and destroy STANDARD.

Furthermore, all hard assets accumulated in the earlier operations will serve as the lower limit guarantee for the market value of STANDARD tokens. How to handle these hard assets will be decided by the DAO at that time.

Earlier, we mentioned charters and that charters can establish branches, and branches can share the STANDARD issued by the system. When a branch holder closes it, they can receive all the STANDARD tokens that branch has accumulated— this is the benefit and profit method of obtaining a charter and opening as many branches as possible.

This is the basic operation mode of Standard Reserve.

Overall, its economic mechanism is quite similar to the current projects empowering tokens, which are using the system's income to repurchase and destroy tokens.

Its innovation lies in that each time there is a net inflow of ETH, it will use this ETH to purchase hard assets to underpin the market value of the system's tokens.

I look forward to seeing the actual results achieved after the project goes live.

Reference link:

https://www.standardreserve.xyz/whitepaper/#dormancy

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